Synopsis:

Goldman Sachs has revised its USD/JPY forecasts lower, citing growing downside risks to the US economy and higher policy uncertainty. The bank notes that diminished US exceptionalism is a meaningful risk to USD strength, and in periods of heightened concern over US growth, the JPY tends to outperform. With lower yields and weaker equities reducing USD upside potential, the range for USD/JPY has now shifted lower, limiting further gains unless uncertainty subsides.

Key Points:

1️⃣ USD/JPY Range Has Shifted Lower 📉

• Increased US economic uncertainty is weighing on USD.
• The yen typically outperforms when US yields and equities decline.

2️⃣ US Growth Risks & Policy Uncertainty Support JPY Strength 🇯🇵

• Higher policy uncertainty is reinforcing safe-haven demand for JPY.
• Market sentiment toward US growth remains fragile, adding to yen appeal.

3️⃣ Updated USD/JPY Forecasts 🎯

• New projections: 150 (3M), 151 (6M), 152 (12M).
• Previous forecasts: 152, 154, 156.
• More limited USD/JPY upside unless policy risks ease.

Conclusion:

Goldman Sachs sees growing downside risks for the USD, prompting a lower revision in USD/JPY forecasts. With weaker US growth expectations, policy uncertainty, and falling yields, the yen is likely to remain strong, capping further upside for USD/JPY.